Recommendation Report - 27 June 2006

WESTERN AUSTRALIAN SALARIES AND ALLOWANCES ACT 1975

SALARIES AND ALLOWANCES TRIBUNAL REPORT UNDER SECTION 7A OF THE SALARIES AND ALLOWANCES ACT 1975, LOCAL GOVERNMENT CHIEF EXECUTIVE OFFICERS.

LEGISLATIVE HISTORY

Section 7A of the Salaries and Allowances Act 1975 provides that the Tribunal shall, from time to time, enquire into and make a report containing recommendations as to the remuneration to be paid or provided to Chief Executive Officers (CEO) of local governments.

The Local Government Amendment Act 2004, section 46(3), amended the Salaries and Allowances Act 1975 to include section 7A and require local government to take into account the recommendations contained in a section 7A report before entering into, or renewing, a contract of employment with a CEO. These amendments arose from a recommendation contained in the report into the City of Joondalup issued by the Legislative Council Standing Committee on Public Administration and Finance in December 2003.

This is the Tribunal’s first report and recommendations under section 7A, Recommendations as to remuneration of local government CEOs. Future reports are to be made at intervals of not more than twelve months.

NATURE OF THE RECOMMENDATIONS

This report and the recommendations it contains is very different from the usual work assigned to the Tribunal by the Parliament. In general terms, the function of the Tribunal has been to determine (or set) the remuneration for positions under its jurisdiction: Members of Parliament, CEOs in the Special Division and Industrial Relations Commissioners. Even in the case of the judiciary, where the Tribunal recommends salaries to Parliament, the effect of such a recommendation is to become determinative if not rejected by either House of Parliament.

In this report, the recommendations of the Tribunal do not involve any specified increase or decrease in the reward package for any individual CEO. The recommendations are made for the purpose specified in the Local Government Act – that is to be taken into account by local governments before entering into, or renewing, a contract of employment with a CEO.

BACKGROUND

There are 142 local governments in Western Australia and also 10 local government regional councils. The local governments vary significantly in size from 1.5 square kilometres to 378,555 square kilometres. Their populations range from 150 to more than 180,000. The CEOs carry out responsibilities identified in the Local Government Act 1995 and other legislation relevant to their local government.

Total Reward Packages for CEOs in local government currently include a diversity of reward strategies. The reward package adopted by individual local governments is specific to its business needs, financial constraints and organisational culture. As well, specific attraction and retention issues are addressed. Local governments also exercise discretion in remunerating individual CEOs based on the level of experience and expertise the incumbent brings to the role; the growth in his/her capability over a period of time and specific characteristics of the local government relative to other comparable local governments.

It is not the Tribunal’s mandate or intent to restrict this flexibility of design, but to provide guidance to local governments by way of recommended Total Reward Packages.

CURRENT ENQUIRY

The Tribunal commenced this first enquiry in September 2005.

The Tribunal carried out the following activities in coming to its recommendations:

Collection of Information - Two separate surveys were sent to all local governments. The first survey established a profile on each local government. The information sought included population, budget and geographic area. The second was to gather details of the components of CEO Total Reward Packages. The response rate from local governments was approximately 80 percent and the Tribunal is satisfied that it has obtained sufficient data on which to make recommendations.

Engagement of consultants - Mercer Human Resource Consulting, a firm with specialist expertise in local government executive remuneration throughout Australia, was engaged to work with the Tribunal in the collection and interpretation of information.

Analysis of information - The information collected was analysed and each local government was classified subsequently into one of the nine bands referred to below.

Analysis of Total Reward Packages - The data collected were analysed to inform the Tribunal of remuneration practices in use and to compare them with community standards and existing practices elsewhere, including the local government sector in Australia. The Tribunal also developed guidelines as to what may be included or excluded from a Total Reward Package.

The Tribunal also considered a submission from the government.

Against the above general background, Mercer has provided the Tribunal with a set of benchmark data on CEO work value assessments, utilising a recognised job evaluation methodology. This has led to the development of the nine band structure against which Total Reward Packages have been applied. Local governments were allocated to the bands using data such as budget, population, staff numbers and geographic size.

As part of this process, the Tribunal, its Executive Officer and consultants have engaged with key stakeholders. This has included the surveys mentioned above, presentations to CEOs and workshops and meetings with the Local Government Managers Association and the Western Australian Local Government Association. The statutory advisor was also consulted.

CLASSIFICATION BANDS

Whilst more detail is given in the Schedule the core recommendation sets nine bands into which local governments are classified. The nine band Total Reward Package range is as follows:

BAND

TOTAL REWARD PACKAGE

NUMBER OF LOCAL GOVERNMENTS

Band 1

$95,000 - $128,500

30

Band 2

$106,000 - $144,000

44

Band 3

$117,000 - $158,500

21

Band 4

$126,000 - $171,000

2

Band 5

$138,000 - $186,500

11

Band 6

$153,000 - $207,000

13

Band 7

$170,000 - $230,000

8

Band 8

$185,500 - $250,500

11

Band 9

$201,500 - $273,000

2

As indicated in the above table the Tribunal has classified the local governments into nine bands. The Tribunal gave consideration to having more and less bands. Nine bands were chosen because when work value points were plotted on a graph, the nine bands resulted in more local governments falling in the middle of the ranges, rather than on the cusps or edges of adjoining bands. For similar reasons eleven levels have been adopted for local government regional councils.

As with the overall recommendations, this classification should not be regarded as determinative. Some interested stakeholders may consider a local government in which they have a specific interest to have been incorrectly classified. The Tribunal will welcome further information to assist in the ongoing refinement/development of the classification process. However, attention is drawn to the fact that the Total Reward Package ranges overlap and are by way of recommendation only.

COMPONENTS OF TOTAL REWARD PACKAGE

Parts 5 and 6 of the Schedule provide a list of items normally included in a Total Reward Package and those which may be excluded from a package.

The Tribunal has not attempted to define the term “remuneration”. Rigid definitions lead to unintended consequences and the ingenuity of providers and recipients of remuneration can never be underestimated. The Tribunal intends the term to have its commonly understood meaning along the lines of “reward; pay for services rendered; serve as or provide recompense for (toil etc.) or to (a person)” (Oxford Dictionary).

The Tribunal also intends that the benefits included in Total Reward Packages have attributed to them dollar amounts that are realistic and are reasonable.

OTHER CONSIDERATIONS

The Tribunal has made its recommendations after its assessment of all the data and information available to it. Being a first recommendation, some of the statistical data, such as economic indices, do not carry their usual significance of being used to guide the adjustment of existing salaries. However, they have been considered. National trends in local government remuneration, comparisons with public and private sector remuneration and the overall information supplied by the local governments have all been considered.

One final note. Those who consider this report are asked to bear in mind its nature. It is a recommendation and the first of its kind for the use prescribed in the Local Government Act. It is not a determination.

RECOMMENDATIONS

The Tribunal recommends that with effect from 1 July 2006 the Total Reward Package paid or provided to local government and local government regional council CEOs be as set out in the attached Schedule.

Signed at Perth this 27th day of June 2006.

Professor M C Wood

J A S Mews

M L Nadebaum

CHAIRMAN

MEMBER

MEMBER

SALARIES AND ALLOWANCES TRIBUNAL

SCHEDULE

PART 1 – LOCAL GOVERNMENT TOTAL REWARD PACKAGE

BAND

TOTAL REWARD PACKAGE

NUMBER OF LOCAL GOVERNMENTS

Band 1

$95,000 - $128,500

30

Band 2

$106,000 - $144,000

44

Band 3

$117,000 – $158,500

21

Band 4

$126,000 - $171,000

2

Band 5

$138,000 - $186,500

11

Band 6

$153,000 - $207,000

13

Band 7

$170,000 - $230,000

8

Band 8

$185,500 - $250,500

11

Band 9

$201,500 - $273,000

2

PART 2 – LOCAL GOVERNMENT CLASSIFICATIONS

LOCAL GOVERNMENT *

BAND

TOTAL REWARD PACKAGE

Albany

7

$170,000 - $230,000

Armadale

7

$170,000 - $230,000

Ashburton

5

$138,000 - $186,500

Augusta-Margaret River

5

$138,000 - $186,500

Bassendean

5

$138,000 - $186,500

Bayswater

8

$185,500 - $250,500

Belmont

7

$170,000 - $230,000

Beverley

2

$106,000 - $144,000

Boddington

1

$95,000 - $128,500

Boyup Brook

2

$106,000 - $144,000

Bridgetown-Greenbushes

3

$117,000 - $158,500

Brookton

2

$106,000 - $144,000

Broome

6

$153,000 - $207,000

Broomehill

1

$95,000 - $128,500

Bruce Rock

2

$106,000 - $144,000

Bunbury

7

$170,000 - $230,000

Busselton

6

$153,000 - $207,000

Cambridge

7

$170,000 - $230,000

Canning

8

$185,500 - $250,500

Capel

3

$117,000 - $158,500

Carnamah

2

$106,000 - $144,000

Carnarvon

5

$138,000 - $186,500

Chapman Valley

2

$106,000 - $144,000

Chittering

2

$106,000 - $144,000

Claremont

3

$117,000 - $158,500

Cockburn

8

$185,500 - $250,500

Collie

3

$117,000 - $158,500

Coolgardie

3

$117,000 - $158,500

Coorow

2

$106,000 - $144,000

Corrigin

2

$106,000 - $144,000

Cottesloe

3

$117,000 - $158,500

Cranbrook

2

$106,000 - $144,000

Cuballing

1

$95,000 - $128,500

Cue

1

$95,000 - $128,500

Cunderdin

2

$106,000 - $144,000

Dalwallinu

2

$106,000 - $144,000

Dandaragan

3

$117,000 - $158,500

Dardanup

3

$117,000 - $158,500

Denmark

3

$117,000 - $158,500

Derby-West Kimberley

6

$153,000 - $207,000

Donnybrook-Balingup

3

$117,000 - $158,500

Dowerin

1

$95,000 - $128,500

Dumbleyung

1

$95,000 - $128,500

Dundas

1

$95,000 - $128,500

East Fremantle

3

$117,000 - $158,500

East Pilbara

6

$153,000 - $207,000

Esperance

6

$153,000 - $207,000

Exmouth

2

$106,000 - $144,000

Fremantle

8

$185,500 - $250,500

Geraldton

6

$153,000 - $207,000

Gingin

3

$117,000 - $158,500

Gnowangerup

1

$95,000 - $128,500

Goomalling

2

$106,000 - $144,000

Gosnells

8

$185,500 - $250,500

Greenough

5

$138,000 - $186,500

Halls Creek

4

$126,000 - $171,000

Harvey

5

$138,000 - $186,500

Irwin

2

$106,000 - $144,000

Jerramungup

2

$106,000 - $144,000

Joondalup

8

$185,500 - $250,500

Kalamunda

6

$153,000 - $207,000

Kalgoorlie-Boulder

7

$170,000 - $230,000

Katanning

2

$106,000 - $144,000

Kellerberrin

2

$106,000 - $144,000

Kent

2

$106,000 - $144,000

Kojonup

3

$117,000 - $158,500

Kondinin

2

$106,000 - $144,000

Koorda

2

$106,000 - $144,000

Kulin

2

$106,000 - $144,000

Kwinana

6

$153,000 - $207,000

Lake Grace

2

$106,000 - $144,000

Laverton

3

$117,000 - $158,500

Leonora

3

$117,000 - $158,500

Mandurah

8

$185,500 - $250,500

Manjimup

5

$138,000 - $186,500

Meekatharra

2

$106,000 - $144,000

Melville

8

$185,500 - $250,500

Menzies

1

$95,000 - $128,500

Merredin

3

$117,000 - $158,500

Mingenew

1

$95,000 - $128,500

Moora

3

$117,000 - $158,500

Morawa

2

$106,000 - $144,000

Mosman Park

3

$117,000 – $158,500

Mount Magnet

2

$106,000 - $144,000

Mount Marshall

2

$106,000 - $144,000

Mukinbudin

1

$95,000 - $128,500

Mullewa

2

$106,000 - $144,000

Mundaring

6

$153,000 - $207,000

Murchison

1

$95,000 - $128,500

Murray

5

$138,000 - $186,500

Nannup

2

$106,000 - $144,000

Narembeen

2

$106,000 - $144,000

Narrogin Shire of

1

$95,000 - $128,500

Narrogin Town of

2

$106,000 - $144,000

Nedlands

6

$153,000 - $207,000

Ngaanyatjarraku

2

$106,000 - $144,000

Northam Shire of

2

$106,000 - $144,000

Northam Town of

3

$117,000 - $158,500

Northampton

2

$106,000 - $144,000

Nungarin

1

$95,000 - $128,500

Peppermint Grove

1

$95,000 - $128,500

Perenjori

2

$106,000 - $144,000

Perth

9

$201,500 - $273,000

Pingelly

1

$95,000 - $128,500

Plantagenet

4

$126,000 - $171,000

Port Hedland

5

$138,000 - $186,500

Quairading

2

$106,000 - $144,000

Ravensthorpe

2

$106,000 - $144,000

Rockingham

8

$185,500 - $250,500

Roebourne

6

$153,000 - $207,000

Sandstone

1

$95,000 - $128,500

Serpentine-Jarrahdale

5

$138,000 - $186,500

Shark Bay

2

$106,000 - $144,000

South Perth

7

$170,000 - $230,000

Stirling

9

$201,500 - $273,000

Subiaco

7

$170,000 - $230,000

Swan

8

$185,500 - $250,500

Tambellup

1

$95,000 - $128,500

Tammin

1

$95,000 - $128,500

Three Springs

1

$95,000 - $128,500

Toodyay

2

$106,000 - $144,000

Trayning

1

$95,000 - $128,500

Upper Gascoyne

1

$95,000 - $128,500

Victoria Park

6

$153,000 - $207,000

Victoria Plains

2

$106,000 - $144,000

Vincent

6

$153,000 - $207,000

Wagin

2

$106,000 - $144,000

Wandering

1

$95,000 - $128,500

Wanneroo

8

$185,500 - $250,500

Waroona

2

$106,000 - $144,000

West Arthur

1

$95,000 - $128,500

Westonia

1

$95,000 - $128,500

Wickepin

1

$95,000 - $128,500

Williams

1

$95,000 - $128,500

Wiluna

2

$106,000 - $144,000

Wongan-Ballidu

2

$106,000 - $144,000

Woodanilling

1

$95,000 - $128,500

Wyalkatchem

1

$95,000 - $128,500

Wyndham-East Kimberley

5

$138,000 - $186,500

Yalgoo

1

$95,000 - $128,500

Yilgarn

3

$117,000 - $158,500

York

3

$117,000 - $158,500

* Christmas Island and Cocos Keeling Islands are not included as they are Commonwealth Territories.

PART 3 – LOCAL GOVERNMENT REGIONAL COUNCILS TOTAL REWARD PACKAGE

LEVEL

TOTAL REWARD PACKAGE

NUMBER OF LOCAL GOVERNMENT REGIONAL COUNCILS

Level 1

$62,800 - $84,900

2

Level 2

$79,900 - $108,100

2

Level 3

$95,000 - $128,500

0

Level 4

$106,000 - $144,000

1

Level 5

$117,000 – $158,500

0

Level 6

$126,000 - $171,000

0

Level 7

$138,000 - $186,500

2

Level 8

$153,000 - $207,000

1

Level 9

$170,000 - $230,000

0

Level 10

$185,500 - $250,500

0

Level 11

$201,500 - $273,000

0

PART 4 – LOCAL GOVERNMENT REGIONAL COUNCIL CLASSIFICATIONS

LOCAL GOVERNMENT REGIONAL COUNCIL **

LEVEL

TOTAL REWARD PACKAGE

Bunbury-Harvey

1

$62,800 - $84,900

Eastern Metropolitan

8

$153,000 - $207,000

Geraldton-Greenhough

2

$79,900 - $108,100

Mindarie

7

$138,000 - $186,500

Murchison

1

$62,800 - $84,900

South East Metropolitan

2

$79,900 - $108,100

Southern Metropolitan

7

$138,000 - $186,500

Tamala Park

4

$106,000 - $144,000

**The Pilbara Regional Council and the Western Metropolitan Regional Council are not included as their CEOs are not in receipt of remuneration.

PART 5 – TOTAL REWARD PACKAGE INCLUSIONS

Each of the following is considered an appropriate component of a CEO’s Total Reward Package.

Base salary

Annual leave loading

Associated FBT accrued

Association membership fees

Attraction/retention allowance

Benefit value of provision of motor vehicle for private use

Cash bonus and performance incentives

Cash in lieu of vehicle

Fitness club fees

Grooming/clothing allowance

Health insurance subsidy

Private phone

Recognition programme benefits

School fees and child’s uniforms (ongoing)

Superannuation

Travel or any other benefit taken in lieu of salary

Unrestricted entertainment allowance

PART 6 – TOTAL REWARD PACKAGE EXCLUSIONS

Each of the following components is considered an appropriate exclusion from the CEO’s Total Reward Package.

Airfare to home base

Appointment/relocation expenses

Computer provision

Entertainment allowance (business restricted)

Expense of office (business restricted)

Isolation/location allowance

Mobile phone

Professional development and library allowance

Rental subsidy *

Travel on business

Water/power subsidies *

* The payment of these subsidies maybe appropriate in some cases such as in remote locations in the state.

The above are considered either a tool of trade benefit (eg mobile phone, computer, library allowance) or a reimbursement for genuine work related expenses (eg expense of office) or compensation for specific disadvantages (eg isolation/location allowances, rental subsidy, water/power subsidy, travel benefits). Mercer’s advice is that these benefits are typically not included in Total Reward Packages in other companies and organisations. The payment of these benefits, where such payment is judged to be fair, not excessive and transparent, maybe considered appropriate but such payments should not be used to artificially inflate the employee’s Total Reward Package.

Signed at Perth this 27th day of June 2006.

Professor M C Wood

J A S Mews

M L Nadebaum

CHAIRMAN

MEMBER

MEMBER

SALARIES AND ALLOWANCES TRIBUNAL

Acknowledgement of Country

The Government of Western Australia acknowledges the traditional custodians throughout Western Australia and their continuing connection to the land, waters and community. We pay our respects to all members of the Aboriginal communities and their cultures; and to Elders both past and present.